Category: consumer

Retail’s evolving face

The retail industry’s evolution tracks how technology is changing our lives.

On the back of last week’s discussion about Amazon’s Australian expansion, I spoke to Sydney community radio station 2SER-FM this morning about the challenges facing suburban shopping strips.

Like the rest of the world, Australia’s suburban and small town retail strips have been doing it hard for a generation. While technology has a lot to do with this, it’s not online commerce that’s the killer.

The decline, recovery and shift of the suburban retail strip really started in the 1960s as people moved to the suburbs and started shopping at supermarkets – the technology driving that shift was affordable motor cars and refrigerators.

Around the developed world, the removal of tram (or streetcar) systems during the 1950s and 60s also hurt the inner city shops as local foot traffic declined. In Sydney it’s striking that fifty years after the removal of the tram system those suburbs that developed around them are still easily recognisable.

Shifting back to the city

In the 1980s another shift happened. Suddenly in the inner city became fashionable again for affluent and young residents and a new generation of shopkeepers sprung up attracted by relatively cheap rents.

The shift we’re now discussing is that generation of the 1980s and 90s has been dispersed as rents become increased or shops are demolished for apartment blocks that cater for the populations moving back into the inner cities now suburbia isn’t so fashionable.

Like all shifts this has consequences – just as the corner grocery store and local butcher was forced out of business by supermarkets in the 1960s and 70s, today the indy fashion store or old fashioned immigrant run cafe is being displaced by high priced gelato shops and restaurants catering for whatever the current food fad is.

The push against consumerism

With increasing rents, tenants increasingly become upmarket brands although the upper end of the market though is not what it was as the middle classes – particularly in cities like Sydney, San Francisco, Singapore and London – find soaring property prices make it harder to indulge in luxury items.

So high rents are driving shopkeepers out of business and in Australia at least, the perverse incentives in taxation laws and investment regulations means that landlords have a positive disincentive to drop their asking prices, which means vacancies increase.

Renew Newcastle successfully skirted landlords’ reluctance by ‘licensing’ space rather than leasing it from landlords. This allowed land banking property developers and valuation conscious commercial owners to let out space without formal leases that created legal or financial issues.

Regional challenges

It will be interesting to see how Newcastle will perform as that land banked buildings are being developed into apartments and, the developers hope, high rent shops.

For other regional areas the news isn’t as great with technology in everything from mining to agriculture automating more jobs out of existence. Much of the decline in country towns and regions during the Twentieth Century was due to the mechanisation of farming.

Pervasive broadband promises some hope for regional communities but at present both jobs and wealth are being increasingly concentrated into major population centres. This however may be a transition effect exacerbated by governments propping up financial sectors after the 2008 economic crisis.

It’s interesting too that the financial sector now is undergoing an automation revolution not dissimilar to that of the twentieth century agriculture industries, something that’s bad news for cities and governments staking their future on those sectors.

Technology driving change

A lesson from the last hundred years is how technology changes our communities, the arrival of refrigeration and the motor car allowed suburbs and supermarkets to develop. While tractors and trucks radically changed the structure of rural communities.

With the rise of new technologies in everything from agriculture to transport and manufacturing, we’ll see similar changes to our societies and businesses in coming years.

The changes faced by today’s retail business are part of an evolving economy, just as the horse and tram dependent city of hundred years ago looked very different from car dependent suburbias of the late 20th Century, tomorrow’s cities will look very different from today’s.

Hacking the connected vehicle

American farmers hacking their tractors with Ukrainian software are a taste of what’s to come in the connected economy.

What happens when a vehicle manufacturer locks down their products’ software? John Deere’s customers are finding out as American farmers turn to Ukrainian software vendors for software to maintain their tractors.

John Deere’s behaviour is extreme as almost every component of a modern tractor has a software component which leaves farmers at the mercy of the company’s dealers and authorised mechanics.

So understandably the farmers are finding ways to hack their equipment to reduce downtime and costs, something permitted in the US after an exemption to the Digital Millennium Copyright Act (DCMA) was granted to vehicle software.

Vendor control over connected vehicles is a bigger problem for consumers than just maintaining the software, as the information collected from these devices becomes more valuable who controls that data becomes more important.

With global supply chains, increased regulatory requirements and demanding markets, the agricultural industries are probably leading the world in applying the Internet of Things and Big Data, so the challenges faced by farmers are things which will affect us all.

As everything from toasters to motor cars become connected and dependent upon code, the conflict between proprietary software, open markets and user rights is going to grow.

Consumers and the free market can only do so much to control the flows of data and who owns them. It’s hard to see how governments can’t become involved in how information is owned, traded and stored.

Working in the gig economy

The motivations of demand economy contractors are varied and not without suspicion towards the services that employ them.

Just what do people think about the on-demand, or gig, economy? A survey by public relations company Burston-Marsteller looked at those who use and provide services for companies like Uber, AirBnB and Instagram.

Unsurprisingly the majority of users are have positive experiences with on-demand services which allows them to access product they couldn’t afford otherwise.

More important are the views of the contractors, and those who are doing these jobs for the flexibility are matched by those who’d rather have full time employment but can’t find a role.

Strikingly, the longer a contractor has worked for one of these services the more likely they are to find the company’s practices exploitative and more than half believe the platforms are gaming the regulations.

Overall, it shows participants in the ‘sharing economy’ have no illusions about the caring aspects of the services that employ them, unlike many of those touting the benefits from the sidelines.

Thinking through the effects of autonomous vehicles

Driverless cars and autonomous vehicles are going to change the economy and workplace. Where will the jobs come from?

The defining technology of the Twentieth Century was the automobile. While there were many advancements – antibiotics, mains electricity and mass communications to name just three – nothing changed society to the same extent as the motor car.

A hundred years ago it was impossible for a pundit to appreciate how the motor car was about to change communities, the population’s increased mobility saw the suburbanisation of cities, the creation of the consumerist society and the rise of industries such as supermarkets and drive in theatres, none of which were foreseeable fifty years earlier.

Change didn’t happen in isolation, those new industries were the result of a number of changes in technology alongside the motor car, for instance the supermarket couldn’t have happened without refrigerators becoming household items along with radio and television developing new markets through the advertising industry.

Economic drivers

The biggest driving force was economic, once motor cars became affordable for the typical worker – just before World War II in the US and in the mid 1950s in most of rest of the Western world – the cost of travelling fell dramatically.

With the cost of moving around falling, workers had the opportunity to move out of the dirty, grimy inner city to new and clean suburbs where they could commute to their jobs in offices and factories. At the same time it also meant families could travel further to buy their groceries, forcing the end of the cornershop and the milkman.

Autonomous vehicles change those economics again, as Uber founder Travis Kalanick pointed out last year, the most expensive item in a taxi or Uber fare is the driver.

During his interview at the Code Conference Kalanick went on to describe how eliminating the driver changes the economics.

“When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle. So the magic there is, you basically bring the cost below the cost of ownership for everybody, and then car ownership goes away.”

Changing ownership

The assumption in today’s discussions about autonomous vehicles is that car ownership will become and thing of the past, something that fits into Travis Kalanick’s view.

Should that be the case then a whole range of new industries open up. Who owns the cars, who dispatches the cars, who plans for peak and normal usage are just a few questions and opportunities that open for savvy entrepreneurs.

A changing concept of ownership doesn’t come without problems, not least who owns the code controlling the vehicles and the data being generated which in turn raises privacy issues.

Loss of jobs

The obvious other question with driverless vehicles is what happens to all the taxi drivers, couriers and long haul truckers as automobiles no longer require operators.

With truck driving being the dominant occupation in most US states, employing 1.8 million workers according to the Bureau of Labor Studies, this is a serious question. Interestingly the BLS forecasts employment to grow five percent per annum over the rest of the decade.

That scale of  job losses hasn’t been unusual over the last century. The agricultural industry itself has seen a massive fall in employment in that time period with the proportion of Americans working in agriculture falling from half the population to a tenth of that.

Creating new industries

Obviously half the US working population didn’t end up being unemployed, with the many of those displaced by the motor vehicle – either in the agricultural sector or in those fields catering for the pre-motor car market – finding work in other fields.

That the economy adapted to the loss of jobs in what were traditional fields in 1915 gives us a clue to where the jobs and industries of the future are going to come from as the changing nature of the economy means new businesses are created.

As the economics of these industries change, we see the need for workers move further up the value chain. We also see those reduced costs open opportunities for new ideas, just as the supermarket concept took hold in the 1950s as the economics of household shopping changed.

This is where the greatest opportunity lies for today’s entrepreneurs lies, in figuring out how those reduced costs will change the way consumers and society use transportation. In turn that will drive the next wave of employment growth.

Smartwatches miss primetime

It appears the smartwatch market is stalling indicating the products were too early.

The US smartwatch market in not yet ready for prime time says Kantar Worldpanel finding most consumers are saying the devices are too expensive and don’t add enough value.

Kantar’s findings are underscored by Apple’s giving discounts to buyers of its smartwatch, something the company is certainly known for.

For all the hype, it appears the smartwatch may well have been the classic tech solution looking for a problem.

McDonalds and its shifting market

Global fast food giant McDonalds is in a bind as markets, society and production methods move against its business

“No business or brand has a divine right to succeed,” said McDonald’s CEO Steve Easterbrook last May.

As McDonalds’ management desperately try to adapt to a changed marketplace, Bloomberg Business spoke to some of those bearing the greatest risks – the fast food chain’s franchisees.

The expansion of menu items and the shift to more custom produced burgers is creating problems for franchisees and store managers as equipment and procedures designed for simpler times struggles with varying demands.

McDonalds is in a terrible bind as the company faces a society-wide shift in consumption that leaves its business model stranded at the same time that the market is wanting more customised products.

The latter is an aspect that many businesses whose success and profitability is based on mass production are now facing as customised products become easier and cheaper to produce.

While McDonalds isn’t likely to go out of business soon, the broader trends aren’t running in its favour. That’s bad news for both the company and its franchisees.

Tipping and mobile payments

During the recent switch over to chip and pin payments, many in the restaurant industry feared that tips would fall and waitstaff would lose jobs, the reality is somewhat different claims PayPal.

This post is the second in a series of four sponsored stories brought to you by Nuffnang.

During the recent switch over to chip and pin payments, many in the restaurant industry feared that tips would fall and waitstaff would lose jobs, the reality is somewhat different claims PayPal.

Last week I had the opportunity to tour the PayPal Innovation Centre in San Jose where they showed off the work they are doing in the retail and hospitality industries to change payment systems.

One of the products they showed was their Pay At Table app that integrates into a café or restaurant’s point of sale system and allows customers to pay their bills immediately.

The immediate reaction to this has been resistance from restaurant managers who were worried customers to skip without paying. For waitstaff, the worry was they could be replaced by an app.

It turns out the technology has had a different effect, the productivity of floor staff in the establishments where the app has been trialled has improved substantially.

“In a typical café it takes around ten minutes to get the check,” says the lead demonstrator of the Innovation Center, Michael Chaplin. “We find that freeing waitstaff up to help customers and letting them pay their bills faster means everybody is happier.”

With that ten minute per table improvement, management have found customers’ satisfaction has improved and the waitstaff have seen tips improve – partly because diners are happy and also because the tipping is integrated into the payment, calculating an appropriate gratuity is always a hassle in the United States.

That ease of payment from mobile phone and table apps is rolling across industries, it’s not just limited to the hospitality sector. Increasingly these technologies are being used by tradespeople, retailers and across the service industries

Increased productivity is more than just saving money and reducing staff numbers, it’s about giving the customer a more seamless and easy experience.

All business need to think carefully about how they can use technology to improve their service and increase revenues.

Amazon and the battle for your pocket

Will an Amazon phone succeed in tethering customers to the company?

Today Amazon is expected to launch a smartphone which the New York Times suggests will tether consumers to the company.

With 240,0000 apps in its Kindle store, Amazon will be formidable competitor to Google Android devices and Apple. Like iTunes, Amazon also have a strength in already knowing the customer’s credit card details.

The question is can Amazon be trusted? As we see with the Hachette book publishers dispute, Amazon is a company that’s ruthless in bullying suppliers and has a mandate to do so from its shareholders.

With the smartphone becoming the centre of the connected lifestyle, the stakes are high as whoever controls the customer’s pocket controls the customer’s smarthome, smartcar, retail and health applications.

Of course whoever wins this battle, they’ll still have to pay Microsoft for patents.

 

Smarthomes come of age

The internet of things isn’t new, it’s just the technology has become more accessible

“After four decades the smartphone comes of age,” proclaims Micheal Wolf in Forbes Magazine.

Wolf is right to a point but he misses the key reason why the smarthome, or the entire internet of things, has become accessible – the technology has simply become affordable.

It was possible to build a smarthome two decades ago, but it was fiendishly expensive and only a few rich people could afford the technology. Today that technology is cheap and easy to install.

This is the common factor with all aspect of the Internet of Things, connecting devices has been possible since before the internet became common but it was expensive and cumbersome so only the highest value equipment – such as oil rigs – was connected.

Now it’s inexpensive and simple to connect things, people are doing it more and that is why there’s a range of security and privacy issues which weren’t so pressing when it was only a few obscure industrial devices that were wired up.

We aren’t inventing the wheel with technologies like the internet of things or big data, they already existed – they are just more accessible and that’s what’s changing business.

Avoiding the smartphone commodity trap

Can HTC avoid the looming commodity trap for smartphone manufacturers?

HTC’s announcement that the company going to focus on lower margin, mid market smartphones illustrates the maturing of the phone marketplace.

Smartphones have been a huge, and immensely profitable, business for cellphone manufacturers however the devices are now becoming a commodity as the high end western markets become saturated and cheaper devices start to enter the marketplace.

Having been comprehensively defeated in the high end marketplace by Samsung and Apple, Taiwanese manufacturer HTC hopes to make money in the lower end of the market.

For HTC it’s questionable how profitable these cheaper markets will be; rebates to telcos and distributor markups tend to eat up most the margin while pushing up retail costs.

The biggest factor of all though is the entry of newer Chinese businesses into the market, it’s going to be a tough for the Taiwanese manufacturer to compete with these suppliers.

Even Apple and Samsung are being affected by the slowing demand for high end smartphones.

HTC’s dilemma would be familiar to most electronic manufacturers; the high end of the market is a narrow niche – the premium smartphone market, like PCs, is dominated by Apple – while the other suppliers fight not to find themselves locked into the commodity end of the market.

For HTC the trap is not to fall into the commodity trap; although it’s hard to see how they’ll do this in a smartphone market that’s increasingly becoming a low margin, high volume game where, like the PC market, there is no middle ground.

Building tomorrow’s markets

As technology evolves, it gets harder to predict what customers will want in the future.

“If I’d asked my customers we’d have built a faster horse,” is a quotation often attributed, probably incorrectly, to Henry Ford.

The point of the quote is that asking today’s customers about tomorrow’s market is pretty pointless when new products change consumer behaviour.

Just as the farmer of 1906 had no inkling of how the motor car, truck and tractor would change their business, the cellphone user of 2006 had no idea of how the iPhone would change the way they used a phone and communicated with the world.

Which brings us to Nokia.

The Sami Consulting blog discusses how Nokia lost their lead in the cellphone business as the market migrated the Apple and later Android smartphones.

Nokia’s problem was they spoke to their customers about their existing mobile phone use rather than considered how the technology might evolve.

When the inventors of the touchscreen approached Nokia, the company carefully evaluated the technology, consulted their customers and decided it wouldn’t work for their products.

What does this story tell about foresight?  First, it shows that innovation creates futures that are fundamentally unpredictable. We do not have facts or data about things that do not exist yet.  When a mobile phone becomes an internet device with sensors, touch screens, and broadband access, it becomes a new thing.  If you ask your existing customers what they like, the answer will always be about incremental improvements.  When you ask about the future, the answer will always be about history.

In many ways Nokia were the beneficiaries of a transition effect, they took advantage of a brief period of technological change  and were caught flat footed when the technologies evolved further.

To be fair, it’s hard to see that change when you’re focused on incremental improvements.

The motor car turned out to define the Twentieth Century – even Henry Ford couldn’t have foreseen how the automobile would change society and the design of our communities.

Both the motor industry and smartphone industries are going through major change, particularly as the internet of everything sees the two technologies coming together.

One thing is for sure, how we use our phones and cars over the next fifty years will be very different to how we use them today.

Understanding the social media whispers

The evolution of Roamz into Local Measure tells us a lot about how businesses can use social media and online local services.

What do you do when paying customers tell you they would rather your product be different to what you were offering? This is the predicament that faced Jonathan Barouch when he discovered the real market for his Roamz service was in social media business intelligence.

How Jonathan dealt with this was the classic business pivot, where the original idea of Roamz evolved into Local Measure.

Originally Roamz was set up to consolidate social services like Twitter, Foursquare and Facebook. If you wanted to find a restaurant, bar or hotel in your neighbourhood, Roamz would pick the most relevant reviews from the various services to show you what was in your neighbourhood.

The idea for Roamz came from when Jonathan was looking for places to take his new baby, jugging several different location services to find local cafes, shops or playground is hard work when you have a little one to deal with.

A notable feature of Roamz was the use of geotags to determine relevance. Even if the social media user doesn’t mention the business, Roamz would use the attached location information to determine what outlet was being discussed.

Enter Local Measure

While Roamz was doing well it wasn’t making money and, in Jonathan’s words, it was a “slower burn, longer term play”. On the other hand businesses were telling him and his sales team that they would pay immediately to use the service to monitor what people were saying about them on social media.

“People said, ‘hey this is cool, we want to pay for this.” Jonathan said of the decision to pivot Roamz into Local Measure.

“I want to say it was a really difficult decision but it wasn’t because we had people saying ‘we want to pay you if you continue with this product.’”

Local Measure is built on the Roamz platform but instead of helping consumers find local venues, the service now gives businesses a tool to monitor what people are saying about them on social media services.

The difference with the larger social media monitoring tools like Radian6 is Local Measure gives an intimate view of individual posts and users. The idea being a business can directly monitor what people are saying are saying about a store or a product.

For dispersed companies, particularly franchise chains and service businesses, it gives local managers and franchisees the ability to know what’s happening with their outlet rather than having to rely on a social media team at head office.

The most immediate benefit of Local Measure is in identifying loyal users and influencers. Managers can see who is tweeting, checking in or updating their status in their store.

Armed with that intelligence, the local store owner, franchisee or manager can engage with the shop’s most enthusiastic customers.

Customer service is one of the big undervalued areas of social media and Jonathan believes Local Measure can help businesses improve how they help customers.

“It makes invisible customers visibile to management,” says Jonathan.

An example Jonathan gives is of a cinema where the concession’s frozen drink machine wasn’t set currently. While the staff were oblivious to the issue, customers were complaining on various social media channels. Once the theatre manager saw the feedback he was able to quickly fix the problem.

Employee behaviour online is also an important concern for modern managers, if employees are posting inappropriate material on social media then the risks to a business are substantial.

“From an operational point perspective we’ve picked up really weird and wonderful things that the business doesn’t know,” says Jonathon. “Staff putting things in the public domain that is really damaging to brands.”

“We’ve had two or three cases of behaviour that you shudder at. I’ve been presenting and it has popped up and the clients have said ‘delete that, we don’t want that up’ and I say ‘that’s the whole point – it’s out there.’”

That’s a lesson that Domino’s Pizza learned in the US when staff posted YouTube videos of each other putting toppings up their noses. Once unruly employees post these things, it’s hard work undoing the brand damage and for smaller businesses or franchise outlets the bad publicity could be fatal.

Local Measure is a good example of a business pivot, it’s also shows how concepts like Big Data, social media and geolocation come together to help businesses.

Being able to listen to customers also shows how marketing and customer service are merging in an age where the punters are no longer happy to be seen and not heard.

It’s the business who grab tools like Local Measure who are going to be the success stories of the next decade, the older businesses who ignore the changes in customer service, marketing and communications are going to be a memory.